Guilty Plea Is Expected In Kickbacks At Law Firm

By BARRY MEIER; Michael J. de la Merced contributed reporting.

Published: September 18, 2007

The securities lawyer William S. Lerach is expected to plead guilty today to a criminal conspiracy charge in connection with a class-action scheme involving his former firm, now known as Milberg Weiss, several people with knowledge of the plea agreement said yesterday.

Mr. Lerach, who has long been under investigation by federal authorities, is expected to enter his plea in United States District Court in Los Angeles. Under the plea deal, he faces one to two years in prison, and will also pay a significant fine, the people said. All spoke on the condition that they not be identified.

Mr. Lerach's plea comes amid a seven-year investigation into whether he and other senior lawyers at Milberg Weiss conspired to pay kickbacks to individuals who agreed to serve as named plaintiffs in class-action lawsuits.

One person with knowledge of the plea deal said that Mr. Lerach would plead guilty to being aware of one such incident.

Another former senior partner in the firm, David J. Bershad, has already pleaded guilty to a charge related to the kickback scheme, and another named partner at the firm, Melvyn I. Weiss, has also been a subject of the investigation, but has not been charged.

For years, Mr. Lerach and his former firm aggressively filed class-action lawsuits, particularly in the securities area. Being the first to organize and file suits also put them in position to get a sizable share of any legal fees produced by the cases.

Mr. Lerach, who did not return a telephone call to his office, long championed the class-action system as an equalizer for small investors and other plaintiffs seeking redress of corporate wrongdoing. John W. Keker, Mr. Lerach's lawyer, did not return a phone call, and the United States attorney's office declined to comment.

Under the plea agreement, Mr. Lerach is not required to cooperate with the government in any further inquiries into the matter, the people knowledgeable about it said. The agreement terms, they said, also call for the law firm from which Mr. Lerach recently resigned, Coughlin Stoia Geller Rudman & Robbins, to face no liability or risk.

If a judge declines to accept the terms of the plea agreement, Mr. Lerach is free to withdraw his guilty plea.

Last month, Mr. Lerach resigned from the firm he founded three years ago to fight the charges. Soon after, his name was excluded from the firm's name. Though they have been under investigation, Mr. Lerach and Mr. Weiss have not been formally charged.

A 20-count indictment against Milberg Weiss handed up in May 2006, stemming from a long federal investigation, sketched out a conspiracy stretching from the 1970s to 2005. Prosecutors say that Milberg Weiss paid $11 million in kickbacks to plaintiffs in more than 150 cases, earning the firm more than $216 million.

Several plaintiffs have stepped forward and said that they received payments from Milberg Weiss in exchange for their testimony.

In July, Mr. Bershad pleaded guilty to one count of conspiracy and agreed to cooperate with prosecutors. His plea was seen as crucial, given his knowledge of the firm's finances.

As part of his plea agreement, Mr. Bershad outlined a decades-long scheme in which the firm recruited plaintiffs, secretly paying them a portion of its legal fees. The plan, according to Mr. Bershad, allowed Milberg Weiss to mount more lawsuits at a faster pace than competitors, making the firm counsel for the lead plaintiff in many cases and earning it a larger share of the fees.

Among Mr. Bershad's claims is that a group of partners personally contributed to a special fund that he used to dole out payments to plaintiffs. The partners were later awarded bonuses equaling their payments to the fund.

Two partners who contributed to the fund, named in Mr. Bershad's statement as simply ''Partner A'' and ''Partner B,'' are widely believed to be Mr. Weiss and Mr. Lerach.